ITU chief: 3G auctions were heavy tax on telecom

The British and German governments helped drive the telecoms industry into its crisis, according to the head of the United...

The British and German governments helped drive the telecoms industry into its crisis, according to the head of the United Nations telecommunications agency.

The governments' auction of frequency spectrum for third-generation (3G) cellular services was the same as a very, very heavy targeted tax on the industry, said Yoshio Utsumi, secretary general of the International Telecommunications Union (ITU) in Tokyo.

"It is not the auction itself that was bad," he continued, rather it was the way the revenues were spent. "[The money] was not used for [the IT] sector but used for other sectors," said Utsumi. "If the money was used, for example, for digitalisation of broadcasting or a related field, then the industry would not have suffered so much."

The British government collected £22.5bn while the German government netted £32bn in high-profile auctions during 2000.

At the time, the industry was enthusiastic about the prospects of 3G services and the prices seemed worth paying, but the bursting of the Internet bubble saw carriers asking for rebates.

The refusal of the British and German governments to cut deals with their respective carriers, combined with pressure from the banks and shareholders who were unwilling to wait years for a return on investments, forced the carriers to cut spending, said Utsumi.

"In the case of BT, they invested overseas but were obliged to sell those investments to improve their financial situation. BT also couldn't make further investments [in equipment] then the manufacturers didn't get money."

The halt on investments was as a source of problems at almost every company serving the telecommunications industry, thus contributed to problems in the sector, he said.

Utsumi stressed that governments were not solely to blame for the industry's problems. "Besides that, the financial market overestimated the future of dot com companies and suddenly realised their over-estimation. Therefore, in my opinion, it is not only the failure of the free market but also the failure of government policy."

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